GBP/USD Fundamental Analysis – week of June 19, 2017

GBPUSD also had a very volatile week but last week was more about the dollar than about the pound. Whereas the previous week was all about the pound, last week was about the dollar and a bit about the pound. The pound seems to be settling down into a groove after the news that the Conservatives have almost finalised on a government setup and this has brought in a sense of stability in the UK politics and this has in turn helped to support the pound.

GBPUSD Saved by the BOE

On the other hand, the Fed has chosen to hike rates, as was widely expected by the markets and this helped to strengthen the dollar. The GBPUSD pair went down back to the range lows at around the 1.2650 region once again last week but was saved by the BOE. Before we go into the details, it has to be noted that the pair has bounced from this region 2 weeks in a row and that should say something about the amount of buying in that region.

The BOE saved the pound last week by being hawkish about the next rate hikes. The market was not expecting a rate hike and the BOE did not hike the rates but what was the surprise was the fact that 3 of the members of the BOE voted for a rate hike (as against 1 in the previous month) and this was a clear signal that they were ready to take action when needed. This was a hawkish signal from the BOE which pushed the GBPUSD pair from the range lows higher through 1.27 and it managed to finish the week just below 1.28 on the back of some weak housing data from the US and it looks ominous.

Looking ahead to the coming week, the only event of note for the pound is the speech from Carney where he would be expected to continue the hawkish stance of the BOE. This would help to keep the pound buoyed and with the 1.2650 acting as a very strong support for the GBPUSD pair, we can expect some consolidation with a bullish bias.